Ascending As-a-Service Economy
By Reynaldo C. Lugtu, Chairman, ICT Committee, and Financial Executives Institute of the Philippines (FINEX)
Juan, owner of a start-up organic farming company in Philippines, recently closed a number of contracts to supply a chain of supermarkets and hotels in the country’s metros. As business grows, he would need to improve on systems such as planting and harvesting schedules, inventory management, logistics and payments. To save on sizeable capital outlays, he subscribes to a monthly-fee cloud service for scheduling, accounting, delivery, and receivables. As business grows further, he hires more workers and subscribes to a monthly-fee payroll service instead of expanding staff support. To extend his reach to a bigger consumer and business customer base, he subscribes to an e-commerce service that allows him to sell products on-line and receive payments.
A situation like this is already becoming common place in Asian countries but already a practice in the Western world wherein business owners subscribe to a pay-per-use or monthly-fee services delivered over the internet that cuts across multiple business functions such as inventory, accounting, warehousing, payroll, marketing, analytics, and data storage, paving the way to a fast-growing ‘as-a-service’ economy.
The term ‘as-a-service economy’, first used by Phil Fersht, Founder and CEO of HfS, a research firm on global sourcing, refers to the shift to an ecosystem of service buyers and providers and how services are purchased, delivered, and consumed.
On the supply side, these developments are driven by the emergence of cloud computing services, which allows for a flexible payment method for business owners. The types of cloud computing services - IaaS (Infrastructure-as-a-Service), PaaS (Platform-as-a-Service), and SaaS (Software-as-a-Service). The latter is where much of the as-a-service economy lies because most of the traditional human-run business functions are now moving to cloud services.
As an example, in the HR function, HR-as-a-service is now emerging with sub-activities like payroll-as-a-service and training-as-a-service. Another example is in productivity functions which are now delivered as a-service such as email, collaboration, and documentations. Other business functions are already in as-a-service models such as in Enterprise Resource Planning, financial planning, marketing research and sales force automation, and Business Intelligence and Analytics.
The as-a-service economy is a huge one and fast-growing. According to Forrester Research, the cloud services market in 2015 stands at close to $100 billion with more than $90 billion comprising SaaS. In 2020, it’s forecasted to reach $160 billion, with a growth rate of more than 25 percent!
On the demand side, the needs of customers and buyers such as that of business owners match the benefits that the as-a-service providers supply such as greater flexibility, cost efficiency gains, improved productivity, and time savings.
Asia Pacific countries are leading the fast adoption of cloud services, this according to the 2016-released Cloud Readiness Index (CRI) by the Asia Cloud Computing Association (ACCA). Hong Kong, Singapore, New Zealand, Australia, and Japan are the top APAC countries leading the index, while Taiwan, Philippines, Indonesia and India are fast rising.
The As-a-Service economy is indeed facing bright prospects. Organizations need to understand the various services available now, and reap the benefits to create more value to its stake holders.